Building firms are being alerted to ensure they are aware of new VAT legislation set to be introduced later in the year.
The VAT reverse charge for construction services removes the need for the supplier to charge VAT on an invoice. Instead, the customer becomes responsible for the charge themselves.
The aim is to avoid what has been called ‘missing trader fraud’ where a supplier will charge and be paid VAT but then disappear before it is declared to HMRC.
As the customer is now responsible to account for VAT this practice can no longer happen.
The new legislation is due to come into force on October 1 and applies to any business registered with the Construction Industry Scheme (CIS). Any firm invoicing a company that is not CIS-registered will still have to charge VAT as before.
It will largely involve contractors and sub-contractors supplying services, for example recruitment, to larger operators. These larger operators should not be an end user such as a property owner or main contractor – they must be selling on the services to another operator.
Jonathan Walton, managing director of Whitley Stimpson said: “This new legislation represents a major shift in how VAT is managed and collected, and construction firms need to be aware of how it will have an impact on their business.
“Smaller firms may suffer financially in that they lose the initial VAT income and it is important that every CIS-registered firm considers the implications for their business.
“Anyone with any queries should not hesitate to contact us and we will advise them of the best action to take for their particular circumstances.”
For further information, contact: Jonathan Walton on 01295 270200 or email: Jonathanw@whitleystimpson.co.uk